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It's been a mediocre week for FinVolution Group (NYSE:FINV) shareholders, with the stock dropping 15% to US$1.42 in the week since its latest annual results. It was a workmanlike result, with revenues of CN¥6.0b coming in 5.9% ahead of expectations, and statutory earnings per share of CN¥7.64, in line with analyst appraisals. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the current consensus, from the three analysts covering FinVolution Group, is for revenues of CN¥3.31b in 2020, which would reflect a substantial 45% reduction in FinVolution Group's sales over the past 12 months. Statutory earnings per share are forecast to tumble 40% to CN¥4.66 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of CN¥5.08b and earnings per share (EPS) of CN¥6.49 in 2020. Indeed, we can see that the analysts are a lot more bearish about FinVolution Group's prospects following the latest results, administering a pretty serious reduction to revenue estimates and slashing their EPS estimates to boot.
The consensus price target fell 28% to CN¥20.37, with the weaker earnings outlook clearly leading valuation estimates. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on FinVolution Group, with the most bullish analyst valuing it at CN¥29.54 and the most bearish at CN¥12.61 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast revenue decline of 45%, a significant reduction from annual growth of 36% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 11% annually for the foreseeable future. It's pretty clear that FinVolution Group's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of FinVolution Group's future valuation.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple FinVolution Group analysts - going out to 2021, and you can see them free on our platform here.
Even so, be aware that FinVolution Group is showing 4 warning signs in our investment analysis , and 2 of those shouldn't be ignored...
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